PAN to become inoperative after March 2023 if not linked to Aadhaar

The Income Tax Department on Wednesday said non-linking of PAN with Aadhaar by March 31 would attract penalty of up to Rs 1,000, but such PAN will remain functional for one more year till March 2023, for filing ITR, claiming refunds and other I-T procedures.

The Central Board of Direct Taxes (CBDT), which is the apex decision making body on direct taxes, has extended the deadline for linking Permanent Account Number (PAN) with Aadhaar many times and the last date now is March 31, 2022.

As per a circular issued by CBDT on Wednesday, PAN, not linked to Aadhaar, would become "inoperative" after March 31, 2023. Those taxpayers who link their PAN with biometric Aadhaar by June 30, 2022, would be required to pay late fees of Rs 500. Beyond that, the penalty would rise to Rs 1,000.

In order to mitigate the inconvenience to taxpayers, as per notification dated March 29, 2022, a window of opportunity has been provided to taxpayers up to March 31, 2023 to intimate their Aadhaar to the prescribed authority for Aadhaar-PAN linking without facing repercussions, the CBDT said, adding such intimation would have to be accompanied by late fees.

"However, till 31st March, 2023 the PAN of the assessees who have not intimated their Aadhaar, will continue to be functional for the procedures under the Act, like furnishing of return of income, processing of refunds etc," the CBDT statement said.

After March 31, 2023, the PAN of taxpayers who fail to intimate their Aadhaar, as required, shall become inoperative and all the consequences under the Act for not furnishing, intimating or quoting the PAN shall apply to such taxpayers, the CBDT added.

As per data available, till January 24, 2022, more than 43.34 crore PANs have been linked with Aadhaar. Over 131 crore Aadhaar cards have been issued so far. PAN-Aadhaar linkage would help in eliminating duplicate PAN and curbing tax evasion.

AKM Global, Tax Partner, Amit Maheshwari said "It is advisable for taxpayers to check their income tax portal and ensure that Aadhaar and PAN are linked. NRIs may have some concerns since in some cases they do not have Aadhaar."

Nangia Andersen LLP Partner Neeraj Agarwala said, while PAN is used for various transactions like opening a bank account, purchase of immovable property or proof of identity, inactive PAN will trigger domino effect and individual who have not linked their Aadhaar may face multiple challenges.

"Once your PAN becomes inactive, the person will be restricted from doing financial transactions (where quoting of PAN is mandatory like mutual funds), subjected to TDS at higher rates and penalty under section 272B," Agarwala said.

For those who do not have access to income tax portal, the linking process is made available through SMS also, he added.

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